**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**Form        10-QSB**

| þ   | QUARTERLY                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                  OF                  1934 |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| o   | TRANSITION                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT                  OF                  1934 |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------|

| Integrated                  Pharmaceuticals,                  Inc.                     |
|----------------------------------------------------------------------------------------|
| (Exact                  name of small business issuer in its                  charter) |

| Idaho                                                                                            |   | 04-3413196                                            |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------|
| (State                  or other jurisdiction of incorporation or                  organization) |   | (I.R.S.                  Employer Identification No.) |

**310        Authority Drive**

**Fitchburg,        MA 01420**

**(978)        696-0020**

| **Title                  of class**                           | **Name                  of Exchange on Which Registered** |
|---------------------------------------------------------------|-----------------------------------------------------------|
|  Common                  Stock, par value $.01 per share |  None                                                |
|  2006                  Common Stock Purchase Warrants    |  None                                                |

**APPLICABLE        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE        YEARS**

**APPLICABLE        ONLY TO CORPORATE ISSUERS**

----

**INTEGRATED        PHARMACEUTICALS, INC.**

**FORM        10-QSB**

**TABLE        OF CONTENTS**

|                                                                                                                    | **Page** |
|-------------------------------------------------------------------------------------------------------------------------|----------|
| **PART                      I. FINANCIAL INFORMATION**                                                             |     |
| ITEM                      1 Financial Statements                                                         | 2        |
| ITEM                      2 Management's Discussion and Analysis                                                   | 11       |
| ITEM                      3 Controls and Procedures                                                                | 12       |
|                                                                                                                    |     |
| **PART                      II. - OTHER INFORMATION**                                                              |     |
| ITEM                      1 Legal Proceedings                                                                      | 12       |
| ITEM                      2 Unregistered                      Sales of Equity Securities and Use of Proceeds  | 12       |
| ITEM                      3 Default Upon Senior Securities                                                         | 12       |
| ITEM                      4 Submission of Matters to a Vote of Security Holders                                    | 12       |
| ITEM                      5 Other Information                                                                      | 12       |
| ITEM                      6 Exhibits and Reports on Form 8-K                                                       | 13       |

**SIGNATURES        **

**NOTE        REGARDING FORWARD-LOOKING STATEMENTS **

**Except        for statements of historical fact, certain information described in this        document contains “forward-looking statements” that involve substantial risks        and uncertainties. You can identify these statements by forward-looking words        such as "anticipate," "believe," "could," "estimate," "expect," "intend,"        "may,"        "should," "will" and "would" or similar words. You should read the statements        that contain these words carefully because these statements discuss our future        expectations, contain projections of our future results of operations or        of our        financial position or state other "forward-looking" information. Integrated        Pharmaceuticals, Inc. believes that it is important to communicate our future        expectations to our investors. However, there may be events in the future        that        we are not able to accurately predict or control. The factors listed below        in        the section captioned "Risk Factors," within the section “Description of        Business” as well as any cautionary language in this Form, provide examples of        risks, uncertainties and events that may cause our actual results and        achievements expressed or implied to differ materially from the expectations        we        described in our forward-looking statements. Integrated Pharmaceuticals,        Inc.        believes that before you invest in our common stock, you should be aware        that        the occurrence of the events described in these risk factors and elsewhere        in        this Form could have a material adverse effect on our business, results of        operations and financial position.**

----

**PART        I**

**ITEM        1.**
**Financial        Statements**

----

**INTEGRATED            PHARMACEUTICALS, INC.**

**(A Development          Stage Company) **
**BALANCE            SHEETS **

----

|                                                                         |   |   | June                      30,  |   |   |                              |   |
|------------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|-----------------------------------|--------|
|                                                                         |   |   | 2005                                |   |   | December                      31, |   |
|                                                                         |   |   |  (unaudited)              |   |   | 2004                              |   |
|                                                                         |   |   |                                |   |   |                              |   |
| **ASSETS**                                                                   |   |   |                                |   |   |                              |   |
| CURRENT                      ASSETS                                          |   |   |                                |   |   |                              |   |
| Cash                                                                    |   | $      | 262,702                             |   | $      | 1,461,708                         |   |
| Accounts                      receivable                                |   |   | 9,000                               |   |   | -                                 |   |
| Inventory                                                               |   |   | 128,241                             |   |   | 83,558                            |   |
| Prepaid                      expenses                                   |   |   | 15,162                              |   |   | 42,543                            |   |
|  Total                      Current Assets                              |   |   | 415,105                             |   |   | 1,587,809                         |   |
|                                                                         |   |   |                                |   |   |                              |   |
| PROPERTY                      AND EQUIPMENT, net                             |   |   | 2,003,768                           |   |   | 2,075,001                         |   |
|                                                                         |   |   |                                |   |   |                              |   |
| OTHER                      ASSETS                                            |   |   |                                |   |   |                              |   |
| Investments                                                             |   |   | 1,220                               |   |   | 2,000                             |   |
| Deposits                                                                |   |   | 763                                 |   |   | 763                               |   |
|  Total                      Other Assets                                |   |   | 1,983                               |   |   | 2,763                             |   |
|                                                                         |   |   |                                |   |   |                              |   |
| **TOTAL                      ASSETS**                                        |   | $      | 2,420,856                           |   | $      | 3,665,573                         |   |
|                                                                         |   |   |                                |   |   |                              |   |
| **LIABILITIES                      AND STOCKHOLDERS' EQUITY**                |   |   |                                |   |   |                              |   |
| CURRENT                      LIABILITIES                                     |   |   |                                |   |   |                              |   |
| Accounts                      payable                                   |   | $      | 216,204                             |   | $      | 269,030                           |   |
| Accrued                      expenses                                   |   |   | 140,811                             |   |   | 114,709                           |   |
| Capital                      leases payable - current portion           |   |   | 1,879                               |   |   | 4,646                             |   |
|  Total                      Current Liabilities                         |   |   | 358,894                             |   |   | 388,385                           |   |
|                                                                         |   |   |                                |   |   |                              |   |
|                                                                         |   |   |                                |   |   |                              |   |
|  Total                      Liabilities                                 |   |   | 358,894                             |   |   | 388,385                           |   |
|                                                                         |   |   |                                |   |   |                              |   |
| COMMITMENTS                      AND CONTINGENCIES                           |   |   | -                                   |   |   | -                                 |   |
|                                                                         |   |   |                                |   |   |                              |   |
| STOCKHOLDERS'                      EQUITY                                    |   |   |                                |   |   |                              |   |
| Preferred                      stock, $0.10 par value, 20,000 shares    |   |   |                                |   |   |                              |   |
|  authorized;                      no shares issued                      |   |   | -                                   |   |   | -                                 |   |
| Common                      stock, $0.01 par value, 75,000,000 shares   |   |   |                                |   |   |                              |   |
|  authorized;                      16,833,239 and 16,443,500 shares      |   |   |                                |   |   |                              |   |
|  issued                      and outstanding, respectively              |   |   | 168,333                             |   |   | 164,435                           |   |
| Additional                      paid-in capital                         |   |   | 6,055,848                           |   |   | 5,609,581                         |   |
| Other                      comprehensive income (loss)                  |   |   | (800                                | )      |   | (20                               | )      |
| Stock                      options and warrants                         |   |   | 7,221,687                           |   |   | 6,613,509                         |   |
| Accumulated                      deficit prior to development stage     |   |   | (494,624                            | )      |   | (494,624                          | )      |
| Accumulated                      deficit during development stage       |   |   | (10,888,482                         | )      |   | (8,615,693                        | )      |
|                                                                         |   |   |                                |   |   |                              |   |
|  Total                      Stockholders' Equity                        |   |   | 2,061,962                           |   |   | 3,277,188                         |   |
|                                                                         |   |   |                                |   |   |                              |   |
|                                                                         |   |   |                                |   |   |                              |   |
| **TOTAL                        LIABILITIES AND**STOCKHOLDERS' EQUITY    |   | $      | 2,420,856                           |   | $      | 3,665,573                         |   |

----

**INTEGRATED          PHARMACEUTICALS, INC.**

**(A            Development Stage Company)**

**STATEMENTS          OF OPERATIONS **

----

|                                                                 |   |                             |                                        |   |   |                                                                    |   |   | February                      1, 2003                             |   |   |                                                               |   |   | Period                        from                         |   |
|----------------------------------------------------------------------|--------|----------------------------------|---------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------|--------|--------|------------------------------------------------------------|--------|
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   | (inception                      of                                |   |   |                                                               |   |   | February                        1, 2003                    |   |
|                                                                 |   |                        | Six                      Months Ended  |   |   |                          Six                          Months Ended |   |   | Period                      from development stage)                      to |   |   | Period                          from February 1, 2003(inception of |   |   | (inception                        of development stage) to |   |
|                                                                 |   |                        | June                      30, 2005     |   |   | June                        30, 2004                                    |   |   | June                      30, 2005                                          |   |   | development                      stage) to                         |   |   | March                      31, 2005                        |   |
|                                                                 |   |                        | (unaudited)                            |   |   | (unaudited)                                                             |   |   | (unaudited)                                                                 |   |   |  December                      31, 2004                       |   |   | (unaudited)                                                |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| REVENUES                                                             |   | $                                | 34,650                                      |   | $      | -                                                                       |   | $      | 34,650                                                                      |   |   | -                                                                  |   |   | 34,650.00                                                  |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| COST                      OF GOODS SOLD                              |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| Materials                      and supplies                     |   |                             | 5,694                                       |   |   | -                                                                       |   |   | 5,694                                                                       |   |   | -                                                                  |   |   | 5,694.00                                                   |   |
|  Total                      Cost of Goods Sold                  |   |                             | 5,694                                       |   |   | -                                                                       |   |   | 5,694                                                                       |   |   | -                                                                  |   |   | 5,694.00                                                   |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| GROSS                      PROFIT                                    |   |                             | 28,956                                      |   |   | -                                                                       |   |   | 28,956                                                                      |   |   | -                                                                  |   |   | 28,956.00                                                  |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| GENERAL                      AND ADMINISTRATIVE EXPENSES             |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| Depreciation                      and amortization              |   |                             | 125,497                                     |   |   | 62,037                                                                  |   |   | 390,213                                                                     |   |   | 264,716.00                                                         |   |   | 326,746.00                                                 |   |
| Research                      and development                   |   |                             | 167,142                                     |   |   | 18,355                                                                  |   |   | 639,895                                                                     |   |   | 472,753.00                                                         |   |   | 558,076.00                                                 |   |
| Marketing                                                       |   |                             | 151,153                                     |   |   | 205,768                                                                 |   |   | 510,810                                                                     |   |   | 359,657.00                                                         |   |   | 431,704.00                                                 |   |
| Legal                      and professional fees                |   |                             | 186,439                                     |   |   | 198,813                                                                 |   |   | 909,916                                                                     |   |   | 723,477.00                                                         |   |   | 801,568.00                                                 |   |
| Consulting                                                      |   |                             | 354,393                                     |   |   | 1,643,555                                                               |   |   | 2,831,792                                                                   |   |   | 2,477,399.00                                                       |   |   | 2,678,928.00                                               |   |
| Idle                      facility expense                      |   |                             | 616,623                                     |   |   | -                                                                       |   |   | 1,024,513                                                                   |   |   | 407,890.00                                                         |   |   | 737,017.00                                                 |   |
| Occupancy                                                       |   |                             | 178,568                                     |   |   | 142,384                                                                 |   |   | 946,001                                                                     |   |   | 767,433.00                                                         |   |   | 870,623.00                                                 |   |
| Labor                      and benefits                         |   |                             | 150,507                                     |   |   | 272,788                                                                 |   |   | 654,498                                                                     |   |   | 503,991.00                                                         |   |   | 573,510.00                                                 |   |
| Services                      paid by stock options             |   |                             | 260,580                                     |   |   | 264,512                                                                 |   |   | 931,645                                                                     |   |   | 671,065.00                                                         |   |   | 805,090.00                                                 |   |
| Office                      supplies and expenses               |   |                             | 22,466                                      |   |   | 71,586                                                                  |   |   | 146,815                                                                     |   |   | 124,349.00                                                         |   |   | 135,577.00                                                 |   |
| Travel                                                          |   |                             | 23,868                                      |   |   | 22,112                                                                  |   |   | 167,103                                                                     |   |   | 143,235.00                                                         |   |   | 156,161.00                                                 |   |
| Other                      general and administrative expenses  |   |                             | 65,227                                      |   |   | 141,137                                                                 |   |   | 353,316                                                                     |   |   | 288,089.00                                                         |   |   | 314,584.00                                                 |   |
|  Total                      General and Administrative Expenses |   |                             | 2,302,463                                   |   |   | 3,043,047                                                               |   |   | 9,506,517                                                                   |   |   | 7,204,054.00                                                       |   |   | 8,389,584.00                                               |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| OPERATING                      LOSS                                  |   |                             | (2,273,507                                  | )      |   | (3,043,047                                                              | )      |   | (9,477,561                                                                  | )      |   | (7,204,054.00                                                      | )      |   | (8,360,628.00                                              | )      |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| OTHER                      INCOME (EXPENSES)                         |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| Interest                      income                            |   |                             | 1,128                                       |   |   | 4,342                                                                   |   |   | 10,040                                                                      |   |   | 8,912.00                                                           |   |   | 9,728.00                                                   |   |
| Interest                      expense                           |   |                             | (410                                        | )      |   | (1,031,906                                                              | )      |   | (1,415,401                                                                  | )      |   | (1,414,991.00                                                      | )      |   | (1,415,236.00                                              | )      |
| Miscellaneous                      income (expense)             |   |                             | -                                           |   |   | (5,516                                                                  | )      |   | (5,560                                                                      | )      |   | (5,560.00                                                          | )      |   | (5,560.00                                                  | )      |
|  Total                      Other Income and Expenses           |   |                             | 718                                         |   |   | (1,033,080                                                              | )      |   | (1,410,921                                                                  | )      |   | (1,411,639.00                                                      | )      |   | (1,411,068.00                                              | )      |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| LOSS                      BEFORE TAXES                               |   |                             | (2,272,789                                  | )      |   | (4,076,127                                                              | )      |   | (10,888,482                                                                 | )      |   | (8,615,693.00                                                      | )      |   | (9,771,696.00                                              | )      |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| INCOME                      TAXES                                    |   |                             | -                                           |   |   | -                                                                       |   |   | -                                                                           |   |   | -                                                                  |   |   | -                                                          |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| NET                      LOSS                                        |   |                             | (2,272,789                                  | )      |   | (4,076,127                                                              | )      |   | (10,888,482                                                                 | )      |   | (8,615,693.00                                                      | )      |   | (9,771,696.00                                              | )      |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| OTHER                      COMPREHENSIVE INCOME (LOSS)               |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| Unrealized                      gain (loss) in market value of  |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
|  investments                                                    |   |                             | (780                                        | )      |   | 80                                                                      |   |   | (800                                                                        | )      |   | (20.00                                                             | )      |   | 60.00                                                      |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| COMPREHENSIVE                      LOSS                              |   | $                                | (2,273,569                                  | )      | $      | (4,076,047                                                              | )      | $      | (10,889,282                                                                 | )      |   | (8,615,713.00                                                      | )      |   | (9,771,636.00                                              | )      |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| NET                      INCOME (LOSS) PER COMMON SHARE,             |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| BASIC                      AND DILUTED                          |   | $                                | (0.14                                       | )      | $      | (0.31                                                                   | )      |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| WEIGHTED                      AVERAGE NUMBER OF COMMON               |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
| SHARES                      OUTSTANDING, BASIC AND DILUTED      |   |                             | 16,555,317                                  |   |   | 13,117,115                                                              |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |
|                                                                 |   |                             |                                        |   |   |                                                                    |   |   |                                                                        |   |   |                                                               |   |   |                                                       |   |

----

**INTEGRATED              PHARMACEUTICALS, INC.**

**STATEMENT            OF STOCKHOLDERS' EQUITY**

**(A            Development Stage Company) **

----

|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|-----------------------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|---------|--------|--------|----------------|--------|--------|-----------------------------------|--------|-------------|------------------------------------|--------|-------------|----------------------------------------|--------|--------|----------------------------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   | Common                      Stock           |   |   |    |   |   |           |   |   |                              |   | Accumulated |                               |   | Accumulated |                                   |   |   |                                   |   |   |              |
|                                                            |   |   |                                             |   |   |    |   |   | Additional     |   |   | Discount                      on  |   |        | Stock                      Options |   |        | Deficit                      Prior to  |   |   | Deficit                      During    |   |   | AccumulatedOther  |   |   |       |   |
|                                                            |   |   | Number of                      Shares  |   |   | Amount  |   |   | Paid-inCapital |   |   | Common                      Stock |   |        | and                      Warrants  |   |        | Development                      Stage |   |   | Development                      Stage |   |   | ComprehensiveLoss |   |   | Total      |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Balance,                      December 31, 2002                 |   |   | 7,646,250                                        |   | $      | 76,463  |   | $      | 173,059        |   | $      | (240,000                          | )      | $           | -                                  |   | $           | (417,775                               | )      | $      | -                                      |   | $      | -                 |   | $      | (408,253   | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average price of        |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $1.01                      per share as an incentive            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      notes payable                          |   |   | 516,250                                          |   |   | 5,162   |   |   | 514,425        |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 519,587    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average price of        |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $0.50                      per share in exchange                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      services and asset purchases           |   |   | 160,719                                          |   |   | 1,607   |   |   | 77,918         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 79,525     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average price of        |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $1.00                      per share in exchange                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      rent expense                           |   |   | 35,240                                           |   |   | 352     |   |   | 59,014         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 59,366     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Value                      of options vested during the         |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| period                                                          |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 12,520                             |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 12,520     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Warrants                      issued as incentive for           |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| notes                      payable                              |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 328,100                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 328,100    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Warrants                      issued for services               |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 180,040                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 180,040    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Payment                      of accounts payable by             |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| shareholder                                                     |   |   | -                                                |   |   | -       |   |   | 27,767         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 27,767     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Close                      discount on common stock             |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| to                      additional paid-in capital              |   |   | -                                                |   |   | -       |   |   | (240,000       | )      |   | 240,000                           |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | -          |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Unrealized                      loss on market value            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| of                      investment                              |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | (100              | )      |   | (100       | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Net                      loss for the year ended                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| December                      31, 2003                          |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | (76,849                                | )      |   | (1,123,977                             | )      |   | -                 |   |   | (1,200,826 | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Balance,                      December 31, 2003                 |   |   | 8,358,459                                        |   | $      | 83,584  |   | $      | 612,183        |   | $      | -                                 |   | $           | 520,660                            |   | $           | (494,624                               | )      | $      | (1,123,977                             | )      | $      | (100              | )      | $      | (402,274   | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Balance,                      December 31, 2003                 |   |   | 8,358,459                                        |   | $      | 83,584  |   | $      | 612,183        |   | $      | -                                 |   | $           | 520,660                            |   | $           | (494,624                               | )      | $      | (1,123,977                             | )      | $      | (100              | )      | $      | (402,274   | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      and warrants issued as incentive     |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      notes payable                          |   |   | 194,950                                          |   |   | 1,950   |   |   | 165,708        |   |   | -                                 |   |        | 222,243                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 389,901    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Value                      of warrants vested during the period |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 1,616,673                          |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 1,616,673  |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Value                      of options vested during the period  |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 658,545                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 658,545    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average of $2.63 per    |   |   | 84,701                                           |   |   | 847     |   |   | 221,662        |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 222,509    |   |
| share                      in exchange for legal services.      |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average of $2.14 per    |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| share                      in exchange for services.            |   |   | 292,083                                          |   |   | 2,921   |   |   | 622,391        |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 625,312    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average price of        |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $2.78                      per share in exchange                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      rent expense                           |   |   | 132,610                                          |   |   | 1,326   |   |   | 367,967        |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 369,293    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued for purchase of assets        |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| at                      $1.88 per share                         |   |   | 9,974                                            |   |   | 100     |   |   | 18,639         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 18,739     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      and warrants issued for cash at      |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| an                      average price of $0.95 per              |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| unit,                      less expenses of $126,000            |   |   | 5,896,000                                        |   |   | 58,960  |   |   | 1,967,135      |   |   | -                                 |   |        | 3,568,905                          |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 5,595,000  |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      and warrants issued for              |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| convertible                      debt plus interest at          |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| prices                      ranging from $0.75 to               |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $1.25                      per unit                             |   |   | 1,434,723                                        |   |   | 14,347  |   |   | 1,572,246      |   |   | -                                 |   |        | 26,483                             |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 1,613,076  |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued for securities at             |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $1.00                      per share                            |   |   | 25,000                                           |   |   | 250     |   |   | 24,750         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 25,000     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued for cash at                   |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| $2.47                      per share                            |   |   | 15,000                                           |   |   | 150     |   |   | 36,900         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 37,050     |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Unrealized                      gain on market value of         |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| investment                                                      |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | 80                |   |   | 80         |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Net                      loss for the year ended                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| December                      31, 2004                          |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | (7,491,716                             | )      |   | -                 |   |   | (7,491,716 | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Balance,                      December 31, 2004                 |   |   | 16,443,500                                       |   | $      | 164,435 |   | $      | 5,609,581      |   | $      | -                                 |   | $           | 6,613,509                          |   | $           | (494,624                               | )      | $      | (8,615,693                             | )      | $      | (20               | )      | $      | 3,277,188  |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Balance,                      December 31, 2004                 |   |   | 16,443,500                                       |   | $      | 164,435 |   | $      | 5,609,581      |   | $      | -                                 |   | $           | 6,613,509                          |   | $           | (494,624                               | )      | $      | (8,615,693                             | )      | $      | (20               | )      | $      | 3,277,188  |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average of $1.77 per    |   |   | 21,751                                           |   |   | 218     |   |   | 38,297         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 38,515     |   |
| share                      in exchange for legal services.      |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average price of        |   |   | 67,620                                           |   |   | 676     |   |   | 118,674        |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 119,350    |   |
| $1.77                      per share in exchange                |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| for                      rent expense                           |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      issued at an average of $1.74 per    |   |   | 14,368                                           |   |   | 144     |   |   | 24,856         |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 25,000     |   |
| share                      in exchange for consulting/BOD       |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| services.                                                       |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Value                      of warrants vested during the period |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 333,818                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 333,818    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Value                      of options vested during the period  |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | 260,580                            |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 260,580    |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Unrealized                      loss on market value of         |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| investment                                                      |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | -                                      |   |   | (780              | )      |   | (780       | )      |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Exercise                      of Options by Consultant at       |   |   | 6,000                                            |   |   | 60      |   |   | 2,040          |   |   | -                                 |   |        | (1,020                             | )      |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 1,080      |   |
| $.18                      per share.                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Stock                      and Warrants issued for Private      |   |   | 280,000                                          |   |   | 2,800   |   |   | 262,400        |   |   | -                                 |   |        | 14,800                             |   |        | -                                      |   |   | -                                      |   |   | -                 |   |   | 280,000    |   |
| Placement                                                       |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
|                                                            |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| Net                      loss for the period ended              |   |   |                                             |   |   |    |   |   |           |   |   |                              |   |        |                               |   |        |                                   |   |   |                                   |   |   |              |   |   |       |   |
| June                      30, 2005 (unaudited)                  |   |   | -                                                |   |   | -       |   |   | -              |   |   | -                                 |   |        | -                                  |   |        | -                                      |   |   | (2,272,789                             | )      |   | -                 |   |   | (2,272,789 | )      |
| Balance,                      June 30, 2005 (unaudited)         |   |   | 16,833,239                                       |   | $      | 168,333 |   | $      | 6,055,848      |   | $      | -                                 |   | $           | 7,221,687                          |   | $           | (494,624                               | )      | $      | (10,888,482                            | )      | $      | (800              | )      | $      | 2,061,962  |   |

----

| **INTEGRATED                        PHARMACEUTICALS, INC.**                                                         |   |                                  |       |                                  |   |                                       |   |                                          |        |                                    |                                     |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|--------------------------------------------|--------|-------------------------------------------------|--------|----------------------------------------------------|-------------|-----------------------------------------|------------------------------------------|
| **(A                        Development Stage Company)**                                                            |   |                                  |       |                                  |   |                                       |   |                                          |        |                                    |                                     |
| **STATEMENTS                        OF CASH FLOWS**                                                                 |   |                                  |       |                                  |   |                                       |   |                                          |        |                                    |                                     |
|                                                                                                                |   |                                  |       |                                  |   |                                       |   |                                          |        |                                    |                                     |
|                                                                                                                |   |                                  |       |                                  |   |                                       |   |                                          |        |                                    |                                     |
|                                                                                                                |   |                                  |       |                                  |   |  Period                        from        |   |  Period                        from           |        |                                    |                                     |
|                                                                                                                |   |                                  |       |                                  |   |  February                        1, 2003   |   |  February                        1, 2003      |        |                                    |                                     |
|                                                                                                                |   |                                  |       |                                  |   |  (inception                        of      |   |  (Inception                        of         |        |                                    |                                     |
|                                                                                                                |   |  Period                        Ended  |       |  Period                        Ended  |   |  development                        stage) |   |  Development                        Stage)    |        |                                    |                                     |
|                                                                                                                |   |  June                        30, 2005 |       |  June                        30, 2004 |   |  to                        June 30, 2005   |   |   to                        December 31, |        |  Year                        Ended |                                     |
|                                                                                                                |   | (unaudited)                                |       | (unaudited)                                |   |  (unaudited)                               |   | 2004                                               |        |                                    | December                        31, 2004 |   |
| CASH                        FLOWS FROM OPERATING ACTIVITIES:                                                        |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Net                        income (loss)                                                                       |   | $                                          | (2,272,789 | )                                          | $      | (4,076,127                                      | )      | $                                                  | (10,888,482 | )                                       | $                                        | (8,615,693 | ) |   | (7,491,716 | ) |
| Adjustments                        to reconcile net income (loss) to net cash                                  |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| flows                        provided (used) by operating activities:                                          |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
|  Depreciation                                                                                                  |   |                                       | 262,400    |                                       |   | 62,037                                          |   |                                               | 527,076     |                                    |                                     | 264,676 |   |   | 243,054 |   |
|  Loss                        on disposition of assets                                                          |   |                                       | -          |                                       |   | 5,482                                           |   |                                               | 7,024       |                                    |                                     | 7,024 |   |   | 7,024 |   |
|  Stock                        and warrants issued as incentive for notes payables                              |   |                                       | -          |                                       |   | 389,900                                         |   |                                               | 496,389     |                                    |                                     | 496,389 |   |   | 389,901 |   |
|  Stock                        issued for interest expense                                                      |   |                                       | -          |                                       |   | -                                               |   |                                               | 149,878     |                                    |                                     | 149,878 |   |   | 149,878 |   |
|  Stock                        issued for rent expense                                                          |   |                                       | 119,350    |                                       |   | 65,058                                          |   |                                               | 548,009     |                                    |                                     | 428,659 |   |   | 369,293 |   |
|  Stock                        issued for services                                                              |   |                                       | 63,515     |                                       |   | -                                               |   |                                               | 990,861     |                                    |                                     | 927,346 |   |   | 847,821 |   |
|  Stock                        issued for assets and securities                                                 |   |                                       | -          |                                       |   | -                                               |   |                                               | 43,739      |                                    |                                     | 43,739 |   |   | 43,739 |   |
|  Stock                        options and warrants vested                                                      |   |                                       | 594,398    |                                       |   | 264,512                                         |   |                                               | 2,869,616   |                                    |                                     | 2,275,218 |   |   | 2,275,218 |   |
|  Recognition                        of noncash deferred financing expense                                      |   |                                       | -          |                                       |   | 578,699                                         |   |                                               | 578,699     |                                    |                                     | 578,699 |   |   | 578,699 |   |
|  Options                        and warrants issued for services and financing                                 |   |                                       | -          |                                       |   | 1,558,673                                       |   |                                               | 253,753     |                                    |                                     | 253,753 |   |   | 26,483 |   |
|  Noncash                        recovery of other income                                                       |   |                                       | -          |                                       |   | -                                               |   |                                               | (1,850      | )                                       |                                     | (1,850 | ) |   | - |   |
| Changes                        in assets and liabilities:                                                      |   |                                       | -          |                                       |   | -                                               |   |                                               | -           |                                    |                                     |   |   |   |   |   |
|  Receivables                                                                                                   |   |                                       | (9,000     | )                                          |   | -                                               |   |                                               | 7,084       |                                    |                                     | 16,084 |   |   | - |   |
|  Inventory                                                                                                     |   |                                       | (44,683    | )                                          |   | (82,295                                         | )      |                                               | (128,241    | )                                       |                                     | (83,558 | ) |   | (83,558 | ) |
|  Prepaid                        expenses                                                                       |   |                                       | 27,381     |                                       |   | 117,243                                         |   |                                               | 132,397     |                                    |                                     | 105,016 |   |   | 94,083 |   |
|  Other                        assets                                                                           |   |                                       | -          |                                       |   | -                                               |   |                                               | 5,607       |                                    |                                     | 5,607 |   |   | 5,607 |   |
|  Accounts                        payable                                                                       |   |                                       | (52,826    | )                                          |   | (32,381                                         | )      |                                               | 117,657     |                                    |                                     | 170,483 |   |   | 78,429 |   |
|  Accrued                        expenses                                                                       |   |                                       | 26,102     |                                       |   | (75,058                                         | )      |                                               | (42,172     | )                                       |                                     | (68,274 | ) |   | (29,050 | ) |
| Net                        cash used by operating activities                                                   |   |                                       | (1,286,152 | )                                          |   | (1,224,257                                      | )      |                                               | (4,332,956  | )                                       |                                     | (3,046,804 | ) |   | (2,495,095 | ) |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| CASH                        FLOWS FROM INVESTING ACTIVITIES:                                                        |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
|  Purchase                        of fixed assets                                                               |   |                                       | (191,167   | )                                          |   | (1,129,070                                      | )      |                                               | (2,665,939  | )                                       |                                     | (2,474,772 | ) |   | (2,273,047 | ) |
|  Leasehold                        concessions received                                                         |   |                                       | -          |                                       |   | -                                               |   |                                               | 185,000     |                                    |                                     | 185,000 |   |   | - |   |
| Net                        cash used by investing activities                                                   |   |                                       | (191,167   | )                                          |   | (1,129,070                                      | )      |                                               | (2,480,939  | )                                       |                                     | (2,289,772 | ) |   | (2,273,047 | ) |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| CASH                        FLOWS FROM FINANCING ACTIVITIES:                                                        |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
|  Sale                        of common stock units                                                             |   |                                       | 280,000    |                                       |   | 5,595,000                                       |   |                                               | 5,912,050   |                                    |                                     | 5,632,050 |   |   | 5,632,050 |   |
|  Payments                        on capital leases                                                             |   |                                       | (2,767     | )                                          |   | (2,407                                          | )      |                                               | (7,684      | )                                       |                                     | (4,917 | ) |   | (4,917 | ) |
|  Payments                        on related party loans                                                        |   |                                       | -          |                                       |   | (41,123                                         | )      |                                               | (56,701     | )                                       |                                     | (56,701 | ) |   | (41,123 | ) |
|  Proceds                        from exercise of options                                                       |   |                                       | 1,080      |                                       |   | -                                               |   |                                               | 1,080       |                                    |                                     | - |   |   |   |   |
|  Proceeds                        from convertible debt                                                         |   |                                       | -          |                                       |   | 389,900                                         |   |                                               | 939,900     |                                    |                                     | 939,900 |   |   | 389,900 |   |
|  Applicable                        beneficial conversion allocated to warrants                                 |   |                                       | -          |                                       |   | -                                               |   |                                               | -           |                                    |                                     |   |   |   |   |   |
| Net                        cash provided by financing activities                                               |   |                                       | 278,313    |                                       |   | 5,941,370                                       |   |                                               | 6,788,645   |                                    |                                     | 6,510,332 |   |   | 5,975,910 |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Net                        increase in cash                                                                         |   |                                       | (1,199,006 | )                                          |   | 3,588,043                                       |   |                                               | (25,250     | )                                       |                                     | 1,173,756 |   |   | 1,207,768 |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Cash,                        beginning of period                                                                    |   |                                       | 1,461,708  |                                       |   | 253,940                                         |   |                                               | 287,952     |                                    |                                     | 287,952 |   |   | 253,940 |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Cash,                        end of period                                                                          |   | $                                          | 262,702    |                                       | $      | 3,841,983                                       |   | $                                                  | 262,702     |                                    | $                                        | 1,461,708 |   |   | 1,461,708 |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| SUPPLEMENTAL                        CASH FLOW DISCLOSURES:                                                          |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Income                        taxes paid                                                                       |   | $                                          | -          |                                       | $      | -                                               |   | $                                                  | -           |                                    | $                                        | - |   |   | - |   |
| Interest                        paid                                                                           |   | $                                          | -          |                                       | $      | -                                               |   | $                                                  | 25,000      |                                    | $                                        | 25,000 |   |   | - |   |
|                                                                                                                |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| NON-CASH                        INVESTING AND FINANCING:                                                            |   |                                       |       |                                       |   |                                            |   |                                               |        |                                    |                                     |   |   |   |   |   |
| Stock                        options and warrants vested                                                       |   | $                                          | 594,398    |                                       | $      | 264,512                                         |   | $                                                  | 2,869,616   |                                    | $                                        | 2,275,218 |   |   | 2,275,218 |   |
| Stock                        and warrants issued for convertible debt                                          |   | $                                          | -          |                                       | $      | 1,447,798                                       |   | $                                                  | 1,613,076   |                                    | $                                        | 1,613,076 |   |   | 1,613,076 |   |
| Stock                        issued for assets and securities                                                  |   | $                                          | -          |                                       | $      | -                                               |   | $                                                  | 43,739      |                                    | $                                        | 43,739 |   |   | 43,739 |   |
| Stock                        issued as deferred incentive for notes payables                                   |   | $                                          | -          |                                       | $      | 389,900                                         |   | $                                                  | 519,587     |                                    | $                                        | 519,587 |   |   | - |   |
| Stock                        issued for rent expense                                                           |   | $                                          | 119,350    |                                       | $      | 65,058                                          |   | $                                                  | 548,009     |                                    | $                                        | 428,659 |   |   | 369,293 |   |
| Stock                        and warrants issued for services                                                  |   | $                                          | 63,515     |                                       | $      | -                                               |   | $                                                  | 990,861     |                                    | $                                        | 927,346 |   |   | 847,821 |   |
| Warrants                        and options issued for deferred services and                        financing  |   | $                                          | -          |                                       | $      | 1,558,673                                       |   | $                                                  | 520,102     |                                    | $                                        | 520,102 |   |   | - |   |
| Accounts                        payable paid by contributed capital                                            |   | $                                          | -          |                                       | $      | -                                               |   | $                                                  | 27,767      |                                    | $                                        | 27,767 |   |   | - |   |
| Noncash                        recovery of other income                                                        |   | $                                          | -          |                                       | $      | -                                               |   | $                                                  | 1,850       |                                    | $                                        | 1,850 |   |   | - |   |

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**NOTE        1 - BUSINESS ORGANIZATION AND BASIS OF PRESENTATION**

**NOTE        2 - LIMITED SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

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**NOTE        3 - PROPERTY AND EQUIPMENT**

|                                              |   | 2005   |      | 2004   |   |
|---------------------------------------------------|--------|--------|-----------|--------|--------|
| Equipment                                         |   | $      | 1,722,655 |   | $      | 1,609,268 |   |
| Furniture                    and fixtures         |   |   | 120,114   |   |   | 106,809 |   |
| Leasehold                    improvements         |   |   | 826,511   |   |   | 762,036 |   |
|                                              |   |   | 2,669,280 |   |   | 2,478,113 |   |
| Less:                    Accumulated depreciation |   |   | (665,512  | )      |   | (403,112 | ) |
| Total                                             |   | $      | 2,003,768 |   | $      | 2,075,001 |   |

----

**NOTE        4 - CAPITAL STOCK**

**NOTE        5 - COMMON STOCK OPTIONS AND WARRANTS**

| Plan                                                                       |   | Number                  of securities to be issued upon exercise of outstandingoptions |   | Weighted-average                  exercise price of outstanding options |   | Number                  of securities remaining available for future issuance under equity                  compensation plans |
|----------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|                                                                       |   |                                                                                   |   |                                                                    |   |                                                                                                                           |
| Equity                  compensation plan approved by security holders (1) |   |   1,258,000                                                                  |   |   $                  0.95                                     |   |   342,000                                                                                                            |
|                                                                       |   |                                                                                   |   |                                                                    |   |                                                                                                                           |
| Total                                                                      |   | 1,258,000                                                                              |   |                                                                    |   | 342,000                                                                                                                        |

----

|                                                                    |   | Number                  of Shares |      | Weighted                  Average Exercise Price |   |
|-------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------------------------------------------|--------|
| Outstanding                  at December 31, 2003                       |   |                              | 690,000   |                                             | $      | 0.25 |   |
| Granted                                                                 |   |                              | 668,000   |                                             |   | 1.61 |   |
| Exercised                                                               |   |                              | -         |                                             |   | - |   |
| Rescinded                                                               |   |                              | (75,000   | )                                                |   | - |   |
| Outstanding                  at December 31, 2004                       |   |                              | 1,283,000 |                                             |   | 0.96 |   |
| Granted                                                                 |   |                              | -         |                                             |   | - |   |
| Exercised                                                               |   |                              | (6,000    | )                                                |   | (0.18 | ) |
| Rescinded                                                               |   |                              | (19,000   | )                                                |   | 1.60 |   |
| Options                  outstanding at June 30, 2005                   |   |                              | 1,258,000 |                                             | $      | 0.95 |   |
|                                                                    |   |                              |      |                                             |   |   |   |
| Options                  exercisable at June 30, 2005                   |   |                              | 540,000   |                                             | $      | 0.66 |   |
| Weighted                  average fair value of options granted in 2005 |   |                              |      |                                             |   | - |   |

**NOTE        6 - CONCENTRATIONS**

**NOTE        7 - COMMITMENTS AND CONTINGENCIES**

----

**NOTE        8 -SUBSEQUENT EVENTS**

**Item        2 **
**Management’s        Discussion and Analysis **

----

**Item        3. Controls and Procedures**

**PART        II. - OTHER INFORMATION**

**Item        1. Legal Proceedings.**

**ITEM        2**
**Unregistered        Sales of Equity Securities and Use of Proceeds**

**ITEM        3 Default Upon Senior Securities**

**Item        4. Submission of Matters to a Vote of Security Holders.**

**Item        5. Other Information.**

----

**ITEM        6 Exhibits and Reports on Form 8-K **

| **Number** | **Description                  of Exhibit**                                                                                                                                                                                                                                          |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1        | Amended                  and Restated Articles of Incorporation of Integrated Pharmaceuticals,                  Inc.                  (1)                                                                                                                                            |
| 3.2        | Amended                  and Restated Bylaws of Integrated Pharmaceuticals, Inc.                  (2)                                                                                                                                                                                |
| 4.1        | Specimen                  Certificate for Integrated Pharmaceuticals, Inc. Common Stock,                  par value                  $.01 per share (2)                                                                                                                              |
| 4.2        | Form                  of Common Stock Purchase Warrant (2)                                                                                                                                                                                                                           |
| 10.1       | Amended                  and Restated Patent License Agreement with NEC Partners                  (2)                                                                                                                                                                                |
| 10.2       | Lease                  Agreement with Chantilas Properties, LLC and Advanced Process                  Technologies, Inc. (2)                                                                                                                                                         |
| 10.3       | Assignment                  and Assumption of Lease(2)                                                                                                                                                                                                                               |
| 10.4       | Consulting                  and Warrant Agreements with James Czirr (2)                                                                                                                                                                                                              |
| 10.5       | 2002                  Stock Plan (2)                                                                                                                                                                                                                                                 |
| 10.6       | Registration                  Rights Agreement(2)                                                                                                                                                                                                                                    |
| 10.7       | First                  Amended and Restated Supply Agreement with Frag-Chem Corporation                  (3)                                                                                                                                                                         |
| 10.8       | Letter                  dated May 5, 2005 amending the Patent License Agreement with NEC                  Partners                  (3)                                                                                                                                              |
| 31         | Certification                  of the Chief Financial Officer of the Company as adopted pursuant                  to                  section 302 of the Sarbanes-Oxley Act of 2002                                                                                                  |
| 32         | Certification                  of the Chief Executive Officer and Chief Financial Officer of the                  Company                  pursuant to 18 U.S.C. section 1250 as adopted pursuant to section                  906 of                  the Sarbanes-Oxley Act of 2002 |

**SIGNATURES**

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